Correlation Between State Grid and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both State Grid and Gansu Jiu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining State Grid and Gansu Jiu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Grid InformationCommunication and Gansu Jiu Steel, you can compare the effects of market volatilities on State Grid and Gansu Jiu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in State Grid with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Gansu Jiu.

Diversification Opportunities for State Grid and Gansu Jiu

0.72

Correlation Coefficient

State Grid  Gansu Jiu

Poor diversification

The 3 months correlation between State and Gansu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and State Grid is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on State Grid InformationCommunication are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of State Grid i.e., State Grid and Gansu Jiu go up and down completely randomly.

Pair Corralation between State Grid and Gansu Jiu

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to generate 1.15 times more return on investment than Gansu Jiu. However, State Grid is 1.15 times more volatile than Gansu Jiu Steel. It trades about 0.03 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.02 per unit of risk. If you would invest  1,611  in State Grid InformationCommunication on October 22, 2024 and sell it today you would earn a total of  210.00  from holding State Grid InformationCommunication or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

State Grid InformationCommunic  vs.  Gansu Jiu Steel

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Grid InformationCommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, State Grid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gansu Jiu Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with State Grid and Gansu Jiu

The main advantage of trading using opposite State Grid and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Grid position performs unexpectedly, Gansu Jiu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gansu Jiu will offset losses from the drop in Gansu Jiu's long position.

The idea behind State Grid InformationCommunication and Gansu Jiu Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.